Renovating homes has always been a promising investment for real estate connoisseurs. With the rise of certain HGTV shows, renovated home sales jumped 2% over the past 3 years, largely due to amateur renovators joining the market. Of course, with some savings and will power, anyone can flip a home. But it’s not as easy as it seems, and it’s important to know the ground rules of remodeling to avoid a disaster. Let’s cover some of the biggest house flipping mistakes before you start your home renovation.
1. Falling Short on Your Budget
It’s almost guaranteed you will come across at least one bump along the road to renovation. There could be so many things wrong with an old home, from a small piping problem to a colossal mold in your house problem. The truth is you never really know what you’re walking into when you purchase a fixer-upper. This is why one of the biggest house flipping mistakes is underestimating your budget. Without enough funds to back you up, you might buy yourself into an unending nightmare instead of the easy ROI you planned for.
2. Paying Too Much for the Home
Naturally, you’ll want to make more money out of your project than you put in. Otherwise, what was all that time and effort for?
To avoid paying too much on a flip, remember the 70% rule. The rule states that as an investor, you should always pay no more than 70% of the after repair value of the home. It’s a safe way to ensure that you’ll ultimately make a profit.
3. Taking Too Long
Time is money- especially when renovating a home. Every day you’ll be responsible for property taxes, miscellaneous costs, and possibly professional labor. Pair this with unpredicted challenges, home inspections, and the time it takes to sell, and your bill will add up quickly. To counter these unwanted effects you should be realistic with your timeline and have a backup plan if things go awry.
4. Designing Too Peculiarly
The ultimate goal of house flipping is to sell your home to an interested buyer. And don’t forget, the more interested buyers, the higher the bidding will go. So avoid the house flipping mistake of designing quirkily. Even a unique paint job can instantly turn people away, so why limit yourself when you don’t have to? Stick with neutral colors and simple fixtures for a broader pool of buyers.
5. Going Overboard
Too much of a good thing can be bad. One of the biggest house flipping mistakes rookies make is adding too many luxuries onto a home that just doesn’t fit with the local market. You may think investing in top-notch appliances and features will pay off in the end. Unfortunately, if these costs drive up the home price much higher than the neighborhood’s average, you’ll end up losing money.
6. Overestimating Your Abilities
If you’re new to the house flipping game, don’t make things harder for yourself than they have to be. You might get tempted to purchase that major fixer-upper at such a low cost, but you’ll be in over your head if you’re a novice at repairing homes. The truth is it’s not that simple, and having to pay for professional help will make a major dent in your return on investment.